Portugal Economic Snapshot

18 Feb 2019: Economic conditions in Portugal have improved markedly over the past few years. GDP is now back to its pre-crisis level and the unemployment rate has declined 10 percentage points since 2013 to below 7%, one of the largest reductions in any OECD country over the past decade.

Nevertheless, legacies of the crisis remain, with the poverty rate of the working age population still elevated and perceptions of subjective wellbeing below pre-crisis levels.

The health of public finances and the financial system need to be further improved. The public debt ratio is falling, but the high debt burden still limits the government’s ability to respond to future economic shocks.

Remaining vulnerabilities in the financial sector also make the economy less resilient. The stock of NPLs have consistently declined (more than 35% since the peak in June 2016 to June 2018). However, the ratio of NPLs to total loan exposures is still one of the highest in the OECD.

Exports as a share of GDP and the stock of foreign direct investment still remain below that of other comparable small European economies (Figure D), although higher than the euro area average.

Judicial inefficiency lowers productivity in the business sector. Recent reforms have reduced the time to resolve a case in the court system, but it remains long (Figure E). At present, inefficiencies in the court system result from difficulties in effectively managing the case workload.

Greenhouse gas emissions per unit of GDP are below the OECD average. As well as raising tax on some forms of energy, such as coal and natural gas, new shared transport solutions should be encouraged, accompanied by appropriate supervision and regulation.

18 Feb 2019: Economic conditions in Portugal have improved markedly over the past few years. GDP is now back to its pre-crisis level and the unemployment rate has declined 10 percentage points since 2013 to below 7%, one of the largest reductions in any OECD country over the past decade.

Nevertheless, legacies of the crisis remain, with the poverty rate of the working age population still elevated and perceptions of subjective wellbeing below pre-crisis levels.

The health of public finances and the financial system need to be further improved. The public debt ratio is falling, but the high debt burden still limits the government’s ability to respond to future economic shocks.

Remaining vulnerabilities in the financial sector also make the economy less resilient. The stock of NPLs have consistently declined (more than 35% since the peak in June 2016 to June 2018). However, the ratio of NPLs to total loan exposures is still one of the highest in the OECD.

Exports as a share of GDP and the stock of foreign direct investment still remain below that of other comparable small European economies (Figure D), although higher than the euro area average.

Judicial inefficiency lowers productivity in the business sector. Recent reforms have reduced the time to resolve a case in the court system, but it remains long (Figure E). At present, inefficiencies in the court system result from difficulties in effectively managing the case workload.

Greenhouse gas emissions per unit of GDP are below the OECD average. As well as raising tax on some forms of energy, such as coal and natural gas, new shared transport solutions should be encouraged, accompanied by appropriate supervision and regulation.